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The Great Depression and World War II, 1929-1945

by David M. Kennedy

Across the long arc of American history, three moments in particular have disproportionately determined the course of the Republic’s development. Each respectively distilled the experience and defined the historical legacy of a century. Each embraced a pair of episodes with lastingly transformative impacts. From 1776 to 1789 the Revolutionary War and the adoption of the Constitution brought national independence and established the basic political framework within which the nation would be governed ever after. From 1861 to 1877 the Civil War and Reconstruction affirmed the integrity of the Union, ended slavery, and generated three constitutional amendments that at least laid the foundation for honoring the Declaration’s promise that "all men are created equal." And between 1929 and 1945 the Great Depression and World War II utterly redefined the role of government in American society and catapulted the United States from an isolated, peripheral state into the world’s hegemonic superpower. To understand the logic and the consequences of those three moments is to understand much about the essence and the trajectory of all of American history.

To a much greater degree than in the earlier cases, the changes set in motion by the Great Depression and World War II had their origins outside the United States—a reminder of the increasing interdependency among nations that was such a salient feature of the twentieth century. The Great Depression was a worldwide catastrophe whose causes and consequences alike were global in character. "The primary cause of the Great Depression," reads the first sentence of President Herbert Hoover’s Memoirs, "was the war of 1914–1918." And that so-called Great War, along with the Depression it spawned, was the driver that eventually produced the even greater catastrophe of World War II.

Economists and historians continue to this day to debate the proximate causes of the Great Depression. But even after due allowance has been made for the effects of the American stock market’s "Great Crash" in 1929 and for the policies of the United States Federal Reserve System, there can be little doubt that the deepest roots of the crisis lay in the several chronic infirmities that World War I had inflicted on the international political and economic order. The war exacted a cruel economic and human toll from the core societies of the advanced industrialized world, including conspicuously Britain, France, and Germany. The lingering distortions in trade, capital flows, and exchange rates occasioned by the punitive Treaty of Versailles, as the economist John Maynard Keynes observed at the time, managed to perpetuate in peacetime the economic disruptions that had wrought so much hardship in wartime. What was more, memories of the war’s bitter fighting and vengeful conclusion rendered the postwar international atmosphere toxic. To those abundant physical and institutional ills might be added a rigidly doctrinaire faith in laissez-faire, balanced national budgets, and the gold standard. All of this added up to a witches’ brew of economic illness, ideological paralysis, and consequent political incapacity as the Depression relentlessly enveloped the globe.

The United States had participated only marginally in the First World War, but the experience was sufficiently costly that Americans turned their country decidedly inward in the 1920s. They disarmed their military forces and swiftly dismantled the nation’s war machinery. The United States Senate refused to ratify the Treaty of Versailles and rejected membership in the nascent League of Nations. Congress in 1922 effectively closed the American market to foreign vendors with the Fordney-McCumber Tariff, among the highest in United States history, and the Smoot-Hawley Tariff eight years later. Washington also insisted that the Europeans repay the entirety of the loans extended to them by the US Treasury during the war. And in 1924 the republic for the first time in its history imposed a strict limit on the number of immigrants who could annually enter the country. Among those eventually excluded (though none could yet know it) were thousands of Jewish would-be fugitives from Nazi persecution. Militarily, diplomatically, commercially, financially, even morally, Americans thus turned their backs on the outside world.

American prosperity in the 1920s was real enough, but it was not nearly as pervasive as legend has portrayed. The millions of immigrants who had swarmed into the nation’s teeming industrial cities in the preceding decades remained culturally parochial and economically precarious in gritty ethnic ghettoes. The overwhelming majority of black Americans still dwelled in the eleven states of the old Confederacy, the poorest and most disadvantaged people in America’s poorest and most backward region. And well before the Great Depression, almost as soon as the Great War concluded in 1918, a severe economic crisis had beset the farm-belt. It did not entirely lift until the next world war, more than twenty years later. The long-suffering countryside was home to nearly half of all Americans in the 1920s; one out of every five workers toiled on the nation’s fields and farms. Virtually none enjoyed such common urban amenities as electricity and indoor plumbing.

Other maladies began to appear, faintly at first, but with mounting urgency as the Depression began to unfold. A ramshackle, woefully under-regulated private banking system, a legacy of Andrew Jackson’s long-ago war on central banking, had managed to wobble its dysfunctional way into the modern era. Some twenty-five thousand banks, most of them highly fragile "unitary" institutions with tiny service areas, little or no diversification of clients or assets, and microscopic capitalization, constituted the astonishingly vulnerable foundation of the national credit. As for government—public spending at all levels, including towns, cities, counties, states, and the federal government itself, amounted only to about 15 percent of the gross domestic product in the 1920s, one-fifth of which was federal expenditures. Ideology aside, its very size made the federal government in the 1920s a kind of ninety-pound weakling in the fight against the looming depression.

Yet for most of the 1920s the mood of much of the country, impervious to news of accumulating international dangers and buoyed by wildly ascending stock prices as well as the congenital optimism long claimed as every American’s birthright, remained remarkably upbeat. Then in the autumn of 1929, the bubble burst. The Great Crash in October sent stock prices plummeting and all but froze the international flow of credit. Banks failed by the thousands. Businesses collapsed by the tens of thousands. Millions—nobody knew at first how many, so primitive were the government’s fact-finding organs—went unemployed. Herbert Hoover, elected just months earlier amid lavish testimonials to his peerless competence, saw his presidency shattered and his reputation forever shredded because of his inability to tame the depression monster—though, again contrary to legend, he toiled valiantly, using what tools he had and even inventing some new ones, as he struggled to get the upper hand.

By 1932, some thirteen million Americans were out of work, one out of every four able and willing workers in the country. Even those horrendous numbers could not begin to take the full measure of the human misery that unemployment entailed. Given the demography of the labor force and prevailing cultural norms that kept most women—and virtually all married women—out of the wage-paying economy, a 25 percent unemployment rate meant that, for all practical purposes, every fourth household in America had no breadwinner. Many Americans came to believe that they were witnessing not just another downswing of the business cycle, but the collapse of a historic economic, political, and social order, perhaps even the end of the American way of life. Yet curiously, as many observers noted, most Americans remained inexplicably docile, even passive, in the face of this unprecedented calamity.

Among those who were perplexed by the apparent submissiveness of the American people as the Depression descended was Franklin Delano Roosevelt. "There had never been a time, the Civil War alone excepted," an associate recollected Roosevelt saying during the 1932 presidential campaign, "when our institutions had been in such jeopardy. Repeatedly he spoke of this, saying that it was enormously puzzling to him that the ordeal of the past three years had been endured so peaceably."[1] That peculiar psychology, rooted in deep cultural attitudes of individualism and self-reliance, strongly impeded any thought of collective—i.e., political—response to the crisis. Those elusive but deep-seated and powerful American cultural characteristics go a long way toward explaining the challenge that faced any leader seeking to broaden the powers of government to combat the Depression.

FDR and the New Deal

Elected to the presidency in 1932 on a platform that promised "a new deal for the American people," Franklin Roosevelt now took up that challenge. He faced a task of compound difficulty: he had to find ways to counter-punch to the Depression crisis, put in place reforms that would make future such crises less likely, and convince his countrymen of the legitimacy of his precedent-shattering initiatives.

FDR was destined to hold office for more than a dozen years. He was thrice re-elected, a record matched by no previous incumbent and forbidden to all future presidents by the passage of the Twenty-second Amendment to the Constitution in 1951. FDR was then and has remained ever since a surpassingly enigmatic figure. His personality perplexed his contemporaries and has challenged his biographers ever since. His long-serving secretary of labor, Frances Perkins, called him "the most complicated human being I ever knew."[2] Yet for all the opacity of his innermost character, he clearly brought with him to the presidency one simple and supremely important belief. It is appropriate to call it a vision: that American life could be made more secure.

Roosevelt, like Hoover before him, never did find a remedy for the Great Depression. It hung heavily over the land for nearly a dozen years of suffering and anxiety without equal in the history of the republic. Before World War II wiped out the Depression at a stroke, none of FDR’s exertions managed to wrestle the unemployment rate below 14 percent. For the decade of the 1930s as a whole, it averaged 17 percent. Some critics mistakenly blame the economy’s stubborn inability to recover on Roosevelt’s own allegedly anti-business policies.

Yet while Hoover’s failure to restore the economy led to his political ruin, Roosevelt seized upon the enduring economic crisis as a matchless opportunity to achieve objectives whose scope far transcended the immediate woes of the Depression decade. FDR used the Depression crisis to break the untamed bronco of let-’er-rip, buccaneering, laissez-faire capitalism that had gone unbridled since the dawn of the industrial revolution in America more than a century earlier. He and his fellow New Dealers invented new governmental institutions like the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC), and the National Labor Relations Board (NLRB) to bring stability to the historically shaky banks, the casino-like stock exchanges, and the often violently tumultuous world of labor relations. They gave birth to other institutions as well, including the Federal Housing Authority (FHA) and the Federal National Mortgage Association ("Fannie Mae") to make mortgage lending more secure, thereby unleashing the money and the energy that made a majority of Americans homeowners and built the suburbs of the Sunbelt after World War II. They passed the Fair Labor Standards Act, abolishing at last the scourge of child labor and establishing minimum wage guarantees. Most famously, with the Social Security Act of 1935 they erected a comprehensive system of unemployment and old-age insurance to protect laid-off workers and the elderly against what FDR called "the hazards and vicissitudes of life."

These were on the whole market-enhancing, not market-encroaching initiatives. They sought not to nationalize core industries (as commonly occurred in European states), nor even to attempt central direction of the national economy, but rather to use federal power in artful ways to make the private economy function more efficiently and less riskily as well as more fairly.

Achieving security was ever the prime value and always the dominant motif of the New Deal’s many innovations. Americans lived for generations thereafter in a world rendered more predictable, less volatile, safer—and for those reasons more prosperous and probably also more just—than they would have enjoyed, or endured, without FDR’s achievements.

The New Deal serves to this day as a political talisman, invoked variously by Left or Right to promote or denounce activist government or an enlarged public sphere. So by what historical standard should the New Deal be judged? If appraised on grounds of swiftly achieving economic recovery, despite some modest success, the New Deal must be declared a failure. But Roosevelt’s greatest ambitions and highest priorities were not simply to get back to business as usual. His highest aim was to do nothing less than rewrite the nation’s historic social contract. And on those grounds the New Deal can be said to have succeeded handsomely.

Roosevelt most explicitly acknowledged that larger ambition in his second Inaugural Address in 1937, when he boasted that "our progress out of the depression is obvious," but then added the startling observation that "such symptoms of prosperity may become portents of disaster." To say the least, that’s an exceedingly rare sentence in the annals of presidential pronouncements. What could Roosevelt have meant when he linked economic recovery with political disaster?[3]

A clue may be found in the passage that immediately followed on that Inaugural Day. "Here is the challenge to our democracy," he said: "One-third of a nation ill-housed, ill-clad, ill-nourished." The context makes clear that he was not then speaking about the victims of the transient Depression, which he believed to be lifting. He was talking, rather, about those farmers and immigrants and African Americans who had long languished on the margins of American life and whom he hoped to usher into its main stream. "We are going to make a country," he once remarked to Frances Perkins, "in which no one is left out." The ironic truth is that it was precisely FDR’s failure to end the Depression that provided him with the necessary political space to enlarge the sphere of American democracy by enacting lasting reforms like the Securities and Exchange Act, the Federal Housing Authority Act, the Social Security Act, the National Labor Relations Act, and the Fair Labor Standards Act.[4]

One test of the logic of this argument might be to ask: If FDR had somehow found the solution to the Depression by, say, the end of the fabled but in the last analysis scarcely consequential Hundred Days in 1933, would there have been a New Deal as we know it? Save only FDIC, all the reforms mentioned above date from 1934 and thereafter. If the economy had been immediately restored to full health, it is at least arguable that business as usual would have meant politics as usual, and the United States would have missed what FDR called its "Rendezvous with Destiny"—that is, its chance to tame at last the volatile and destructive demon of no-holds-barred industrial capitalism whose unchecked gyrations had ravaged lives—and fortunes—for nearly a century before the 1930s.

World War II

The world the American people had tried to exclude after the First World War could not forever be kept at bay. Adolf Hitler and Franklin Roosevelt came to power within weeks of one another. Hitler was installed as the German chancellor on January 30, 1933; Roosevelt was inaugurated as President of the United States just thirty-three days later, on March 4. The entire history of Roosevelt’s presidency unfolded under the shadow of Hitler’s chancellorship and eventually the swelling belligerency of Japanese militarists. The challenges of the Great Depression and the accomplishments and shortcomings of the New Deal, and of FDR, cannot be understood outside of that framework. And just as the story of the Great Depression is not simply the story of the American people in a moment pregnant with both danger and opportunity, the story of World War II is a tale of peoples around the world violently swept up in its frightful cataclysm—though the Americans, as it happened, were uniquely spared the worst of the war’s ravages.

The Japanese attack on the US naval base at Pearl Harbor, Hawaii, on December 7, 1941, brought the United States into the war as a formal belligerent—more than two years after the war had begun with the German invasion of Poland on September 1, 1939. Yet while it has become a commonplace to note that the Pearl Harbor attack dramatically extinguished American isolationism, the fact is that traditional isolationist sentiment was by that time already markedly diminished—and that anxieties about its possible revival animated American leaders throughout the conflict and well into the postwar period.

At the outset of his presidency, Franklin Roosevelt had not challenged the isolationist mood of his countrymen, declaring in his first Inaugural Address that "our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy." But as the international environment grew more perilous, FDR worked ever harder to disabuse Americans of the view that the world’s problems were none of their concern. He chafed increasingly under the restrictions of the several "Neutrality Laws" that Congress passed between 1935 and 1939, and succeeded at last in securing passage of the Lend-Lease Act in March 1941, committing the vast economic resources of the United States to the war against the so-called Axis Powers of Germany, Japan, and Italy. Hitler, correctly, deemed the Lend-Lease Act tantamount to a declaration of war. With an initial appropriation of some $7 billion (nearly equal to the entire average annual federal budget in the 1930s, and reaching nearly $50 million by war’s end) Lend-Lease aimed to make the United States into what Roosevelt called "the great arsenal of democracy."

With some qualifications, the "arsenal of democracy" concept remained at the core of American grand strategy throughout the war. To be sure, the United States took nearly sixteen million men (and several thousand women) into uniform, fielded a ninety-division ground force, floated a two-ocean navy, built a gigantic strategic bomber fleet, and suffered 405,399 military deaths. Yet the greatest American contribution to the war effort was neither manpower nor heroism, but cash and weapons. As the Soviet leader Joseph Stalin cynically but accurately observed, the United States adhered to a policy of fighting with American money, and American machines, and Russian men. Some eight million Soviet troops died fighting Hitler’s Wehrmacht, while as many as sixteen million Soviet civilians perished. In a war with the dubious historical distinction that it inflicted more civilian than military deaths, the American toll of civilian deaths attributable to enemy action in the forty-eight continental states was six—a young woman and five schoolchildren killed together by a crude Japanese balloon-borne fire bomb that exploded in south-central Oregon on May 5, 1945.

Thus if the response to the question "who won World War II?" is determined by who paid the greatest price for the ultimate victory, the answer is unambiguously the Soviet Union. Yet if one means which country most benefited from victory, the equally unambiguous answer is the United States. Not only were American war deaths, proportionate to population, about one-sixtieth those in the Soviet Union, and one-fourth those in Great Britain, but among all the major belligerents, the United States alone managed to grow its civilian economy even while producing prodigious quantities of armaments and other supplies for itself and its allies. The civilian economies of both the Soviet Union and Great Britain shrank by nearly one-third during war time. In the United States civilian consumption expanded by nearly 15 percent. The war forever banished the Depression and ignited the economic after-burners that propelled the American economy to unprecedented heights of prosperity in the postwar decades.

How did the Americans manage to fight a war so different from the war that so horribly punished so many other peoples? Geography—or, more precisely, the conjunction of geography with the technologies available in the mid-twentieth century—is surely part of the answer. The two-ocean moat that for centuries had shielded the New World from the Old World continued to insulate the United States in World War II—though the advent of America’s own long-range, ocean-spanning strategic bombers clearly signaled the end of the republic’s long era of "free security."

But American grand strategy in World War II was built upon more than the accidents of geography. Like any leader in a comparable situation, Roosevelt sought what economists call a "least-cost pathway" to victory, shrewdly employing his country’s peculiar assets and capabilities to maximum advantage at minimum cost—and doing so in ways that would be least likely to reawaken the isolationist sentiment that Roosevelt had battled throughout the prewar decade.

Four great principles lay at the core of that grand strategy: to focus on Germany, not Japan, as the primary strategic foe (as Roosevelt said, the defeat of Germany would mean the defeat of Japan, but the defeat of Japan would not mean the defeat of Germany); to rely principally on the novel doctrine of strategic bombing, aiming not at the enemy’s forces in the field, but at his civilian heartland; to keep the ground force as small as possible, leaving millions of men to work on the home-front industrial production lines; and to delay as long as feasible the great amphibious invasion of northwest Europe—the battle eventually known as "D-Day." The Soviet victory at Stalingrad in February 1943 ratified the viability of all those principles by reassuring Roosevelt and his British ally, Winston Churchill, that the Russians would stay in the war and bear the brunt of the fighting. The much-debated "unconditional surrender" formula that FDR announced at Casablanca in January 1943 was primarily intended to reassure the Soviets that the Americans and British, too, were committed to seeing the war through to the extinction of the Nazi regime, which eventually came on May 8, 1945.

The war against Japan, originally conceived as a purely defensive affair to hold the Japanese at bay in the mid-Pacific until Germany was defeated, took an unexpected turn in June 1942 when the Imperial Japanese Navy lost four aircraft carriers at the Battle of Midway. Though the war against Germany still had the higher priority, the door now opened for American offensive actions in the Pacific. US forces relentlessly closed in on the Japanese home islands, culminating in months of intensive firebombing raids against Japan and ultimately the atomic bombings of Hiroshima and Nagasaki in August 1945, which clinched the Japanese decision to surrender.

In that same month Winston Churchill declared that the triumphantly victorious United States, restored to economic health, flush with energy, morally and politically self-confident, stood "at the summit of the world."[5] For a nation that just half a decade earlier had lain economically prostrate at the distant margins of the international order, that was a remarkable accomplishment and one that would shape the character of the remainder of the twentieth century, abroad as well as at home.

David Kennedy is Donald J. McLachlan Professor of History, Emeritus at Stanford University. Among his books are Over Here: The First World War and American Society (1980) and the Pulitzer Prize–winning Freedom from Fear: The American People in Depression and War (1999),which recounts the history of the United States in the two great crises of the Great Depression and World War II.